Is Restoring the Deduction for Gambling Losses That Big of a Deal? Here’s What the IRS Says

It’s becoming increasingly likely that tax filers who itemize their federal returns will be able to deduct 100% of their gambling losses against their winnings for the 2026 tax year. The Internal Revenue Service Building in Washington, DC. The federal tax code is likely to be amended to restore the gambling loss deduction to 100% against winnings. (Image: Shutterstock) On Wednesday (Sept. 16), the House Ways and Means Committee passed the Digital Asset Tax Certainty Act with a 38-5 vote. While House Resolution 10357 modernizes the federal tax code for the digital asset economy, tucked away in the 98-page bill is a provision that restores the deduction for gambling losses to 100%. The gambling write-off was trimmed to 90% through the Republicans’ and President Donald Trump’s One Big Beautiful Bill Act (OBBBA). Las Vegas and the legal gaming industry have since been lobbying Congress to restore the gambling tax deduction to 100%, arguing that the reduction means gamblers who win $100,000 but also lose $100,000 would still need to pay federal taxes on $10,000 in unrealized earnings. IRS Data Shines Light on Gambling Losses Nevada’s congressional delegation, as well as delegations from other major gaming states, such as Pennsylvania, have told lawmakers on Capitol Hill that the 90% deduction cap would have devastating consequences on the legal gaming market and push some to offshore gambling. For Nevada, this is about protecting our economy and the workers and small businesses who depend on tourism and gaming. Their livelihoods are at stake,” said Rep. Steven Horsford (D-NV), whose FULL House Act was the provision included in the Digital Asset Tax Certainty Act. The gaming industry and lawmakers closely tied to it argued that by not allowing 100% of losses to be deducted against winnings, casinos across the country would suffer, leading to closures, job cuts, and reduced tax revenue. They contended that the benefit to the federal government, an estimated $1.1 billion over eight years, was greatly outweighed by the risk to the gaming economy. What do the numbers from the Internal Revenue Service (IRS) say? According to IRS data for the 2023 tax year, the most recently disclosed statistical year, only 15.1 million taxpayers filed itemized returns. After the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, the number of itemized returns fell sharply, from roughly 30% of filers to about 10%. In 2023, the IRS said 592,864 itemized filers took advantage of the gambling loss deduction, or less than 4% of the itemized filings. The federal tax agency handled 153 million individual income tax returns that year, meaning the gambling deduction impacted less than 0.4% of the taxpaying population. However, those who did use the gambling deduction deducted substantial losses. Gambling earnings for 2023 were reported at more than $50.1 billion, with $42.7 billion in losses deducted. If the 90% cap was in place, the gambling deductions would have been shaved to around $38.4 billion. The IRS requires that gamblers itemizing deductions keep an accurate record of winnings and losses and “be able to prove those amounts with receipts, tickets, statements, or similar items” should the return be audited. The post Is Restoring the Deduction for Gambling Losses That Big of a Deal? Here’s What the IRS Says appeared first on Casino.org.